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Stree is about to re-enter Chanderi, where she notices a statue of herself at the town entrance built by the townspeople as a sign of respect with the inscription, O Stree Raksha Karna (transl.Oh Woman Protect us), and chooses to leave Chanderi.

Years later, Chanderi faces a new threat in the form of Sarkata, a headless ghost, who abducts women at night and drags them into a nightmarish alternate dimension. The townspeople, unaware of the ghost's presence, mistakenly believe the missing women have left for better prospects. Vicky, still in love with the unnamed girl, frequently imagines her appearing before him. Meanwhile, Rudra receives an anonymous letter containing missing pages from the Chanderi Puran and a cryptic message Vo Aayega (transl.He will come). A concerned Rudra warns Vicky about it, but is dismissed.

One night, Bittu's girlfriend Chitti is taken by Sarkata. A stoner beggar who witnessed the abduction confirms the ghost's existence. Vicky, Bittu and Rudra investigates the torn pages of the Chanderi Puran and discover Sarkata's origin. They find out that Sarkata is the vengeful spirit of Chandrabhan, a former village head who murdered Stree, a courtesan, by beheading her husband and burning her alive. Stree returned as a spirit and beheaded Chandrabhan and his associates. After Stree's departure from Chanderi, Sarkata has returned to target progressive women. Realising they need Stree's help to defeat Sarkata, the friends seek out Jana in Delhi, who was once possessed by Stree.

Jana, living with his cousin Bhaskar, is lured back to Chanderi under the pretext of a stage play. After discovering the real reason, Jana reluctantly agrees to assist. While searching for Stree at the old fort, Sarkata attacks and nearly kills Jana, who experiences visions of the alternate dimension where the abducted women are held captive. Believing Jana to be dead, the group is shocked when he revives and they narrowly escape the fort with Sarkata in pursuit. As Sarkata terrorises the town, She reappears and saves the group by fighting Sarkata using the powers of Stree's braid attached to her hair. The town's women, living in fear, blame Vicky for defeating Stree, which they believe led to Sarkata's emergence.

They pressure Vicky to take responsibility for the new threat and She convinces him that his pure soul makes him the right person for the task. She gives Vicky a magical dagger and instructs him to use it to cut Sarkata's head in half. To trap Sarkata, the group organises a dance performance by Shama, Rudra's girlfriend. During the performance, Sarkata appears, but Vicky is unable to decapitate him. Sarkata possesses all the men present, except Vicky, Rudra and Jana. Sarkata subsequently abducts Shama and the possessed men, including Bittu, begin controlling the town's women.

Desperate for a solution, the group follows a clue from the anonymous letter to a mental asylum, where they meet a descendant of Sarkata. The man reveals that Sarkata can only be defeated by a being that is half of both—neither fully man nor woman, human nor animal. With this knowledge, She merges her body with Vicky, creating a being capable of entering Sarkata's lair. Inside the lair, Vicky and She confront Sarkata. Vicky cuts Sarkata's head in half with the magical dagger, but each severed head regenerates into multiple new heads. As they are overwhelmed, Bhaskar arrives and attacks Sarkata.

However, the battle becomes dire when Sarkata re-attaches his head and overpowers Bhaskar. In a final attempt, She calls out to her mother, who is surprisingly revealed to be Stree. Stree arrives and, with Vicky's help, defeats Sarkata by beheading him again and dragging his body into the lava, destroying him for good. After Sarkata's defeat, the women are freed and the men are released from the ghost's control. Vicky and his friends are celebrated as heroes. She reveals that she is a ghost and must leave, but not before whispering her name to Vicky.

In the forest, Bhaskar, now human, meets Jana and asks him to set him up with She. Jana declines, but Bhaskar continues to plead. They discuss about returning to Delhi after visiting Chanderi. Bhaskar informs Jana about a new threat in Delhi about a man, who is sucking blood out of people's neck.

In a mid-credits scene, a mysterious pot containing Sarkata's remains reaches the mental asylum, where his descendant inhales the flaming smoke from the remains and becomes possessed by the monster.